TMI Blog2022 (10) TMI 683X X X X Extracts X X X X X X X X Extracts X X X X ..... vidences were never controverted by the lower authorities or by the revenue before us. Hence in view of the aforesaid observations and respectfully following the judicial precedents relied upon hereinabove, we direct the ld. AO to delete the disallowance made on account of foreign travel expenses - Accordingly, the Ground No.1 raised by the assessee is allowed. Adhoc disallowance of 25% made on account of domestic travel expenses - HELD THAT:- AO made an adhoc disallowance of domestic travel expenses @ 25% and made disallowance in the assessment. It was specifically submitted that the assessee company was previously located in New Delhi and later shifted to Mumbai. In this regard, frequent visits were mandated in order to meet various regulatory compliance requirements and hence employees and its directors had to travel frequently to Gurgoan for the purpose of business. In any event, the books of accounts of the assessee were not rejected by the ld. AO by pointing out certain defects in the evidences submitted by the assessee. Hence there cannot be any adhoc disallowance that could be made by the revenue. On this count also, apart from merits, we have no hesitation in directin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . We direct the ld. AO to allow depreciation thereon to the assessee company. Accordingly, the Ground No. 4 raised by the assessee is allowed. Recomputation of income of the assessee to allow short term capital loss - HELD THAT:- We find that the assessee had claimed total loss as per Return of income at Rs 39,68,046/- , but the ld. AO while framing the assessment had started the computation with loss of Rs 28,56,420/-. We find that the ld. CIT(A) had only directed the ld. AO to verify the same and recompute total income of the assessee accordingly. Hence there cannot be any grievance for the assessee in this regard as it has already been addressed by the ld. CIT(A) and the matter is pending before the ld. AO. Hence the Ground No. 5 raised by the assessee is dismissed. Seeking TDS credit anad set off of MAT credit u/s 115JAA - HELD THAT:- This aspect has been set aside to the file of ld. AO by the ld. CIT(A) to decide in accordance with law and it is pending before the ld. AO. Hence there cannot be any grievance for the assessee. Accordingly, the Ground raised by the assessee is dismissed. - ITA No.1912/Mum/2020 - - - Dated:- 28-9-2022 - Shri M.Balaganesh, Accountant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nexus thereon. The ld. AO however completely ignored all the contentions of the assessee and proceeded to disallow the said foreign travel expenses in total on the ground that the said expenditure is not incurred wholly and exclusively for the purpose of business of the assessee company. We find that the explanation given by the assessee during the course of assessment proceedings that the purpose of foreign travel was to explore the recent development in relation to real estate development sites, check the quality of materials to be used for construction of the building so as to add value to the normal construction activity, was rejected by the ld. AO. It was submitted that the foreign tours were meant for understanding the global recent trends in building construction and that was the reason, the architect was also taken along with the directors to the concerned country. The ld. AO however observed that the construction projects undertaken by the assessee are very small and hence there was no requirement of having a study tour thereon ; that no evidence has been submitted by the assessee to prove the benefit derived by the assessee out of these foreign tours. Accordingly, the ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... does not make any distinction between civil litigation and criminal litigation. In fact, expenses incurred in connection with litigation are not separately dealt with under that provision. In our opinion, it makes no difference whether the proceedings are civil or criminal. All that the court has to see is whether the legal expenses were incurred by the assessee in his character as a trader, in other words, whether the transaction in respect of which proceedings are taken arose out of and was incidental to the assessee's business. Further, we have to see whether the expenditure in question was bona fide incurred wholly and exclusively for the purpose of business: see Commissioner of Income-tax v. Birla Cotton Spinning and Weaving Mills Ltd. [1971] 82 ITR 166; [1972] 1 S.C.R. 283 (SC) It is true that in some of the cases this court has held that an expenditure incurred by an accused assessee to defend himself against a criminal charge did not fall within the scope of section 10(2)(xv). Those decisions were rendered on the facts of those cases. That is not the position in this case. On the findings arrived at by the Tribunal, it is clear that the assessee had incurred the expend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n account of domestic travel expenses in the facts and circumstances of the case. 3.1. We have heard the rival submissions and perused the materials available on record. At the outset, the ld.AR vehemently submitted that there was an independent show cause notice dated 5.3.2015 issued by the ld. AO contemplating to make disallowances / additions in respect of various issues before completing the assessment and opportunity of hearing was given to the assessee in that regard. However, with regard to adhoc disallowance of domestic travel expenses, no such show cause notice per se was given by the ld. AO. It is a fact on record that the assessee duly furnished the complete details of domestic travelling expenses before the lower authorities. These are enclosed in pages 33 and 34 of the paper book. The assessee gave a detailed explanation as to what was the purpose of domestic travel, name of the person who had travelled, break up of fuel expenses thereon, ticket cost, etc together with relevant supporting evidences. There cannot be any personal element in these expenses. Without appreciating the explanations and supporting evidences, the ld. AO made an adhoc disallowance of domestic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness nexus is proved beyond doubt. Since the payments were incurred out of credit cards belonging to the directors, the assessee company had reimbursed the same to the directors. It is not personal in nature. Moreover, payment to Ambey Valley City has been made through Cheque No. 003239 from the bank account of the assessee company in the sum of Rs 1,55,411/-. The entire bills issued by various vendors were duly placed by the assessee before the ld. AO .Without looking into any of those bills, the ld.AO by mere suspicion, surmise and conjecture , proceeded to treat the entire expenses as personal in nature and disallowed. We hold that the action of the ld. AO and ld. CIT(A) is certainly unsustainable in the eyes of law. The observations made by us hereinabove for Ground No.1 supra together with case laws relied upon thereon would hold good for this ground also. Accordingly, we direct the ld.AO to delete the disallowance made on account of business promotion expenses in the sum of Rs 2,42,514/- and hence Ground No. 3 raised by the assessee is allowed. 5. The next ground to be decided in this appeal is as to whether the ld. CIT(A) was justified in confirming the disallowance made ..... 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